3. Discussion
All of the rules we adopt today are based on the 2001 Draft. In fact, many of the rules are identical in substance to proposed rules (albeit numbered differently) in the 2001 Draft; where we have further revised our proposals, these revisions often resulted directly from comments on the 2001 Draft. Our discussion follows the order of the rules as set forth in the Appendix.
3.1 Rules 1-1.2 (Applicability; Code of Ethics; Computation of Time)3
These rules are not controversial, but they address several points that are not always clear under current practice. For example, Rule 1.2 states that a filing deadline is extended to the next business day if the last day for performing an act does not fall on a business day. This explicit statement should avoid unnecessary inquiries and requests for extension of time.
Rule 1 distinguishes advice letters from formal proceedings before the Commission, such as an application. Because advice letters never involve evidentiary hearings, any matter involving such hearings is excluded from coverage under these rules. Finally, we note that although GO 96-B will cover periodic and occasional utility reports ("information-only filings") as well as advice letters, these reports are beyond the scope of the rules adopted today.
In response to comments, we have added a paragraph to Rule 1 to more explicitly delineate how the rules adopted today relate to previously adopted rules on advice letters generally and to specific types of advice letters.
3.2 Rules 2-2.2 (Cover Sheet, Form, and Content of Advice Letters)4
These rules are intended to remove guesswork for those who have the job of preparing or reviewing advice letters. The "cover sheet" (Rule 2.1) concisely summarizes all critical information about a given advice letter. The content requirements help ensure that the advice letter is complete and easy to review, and limit the need for information requests after the advice letter is filed. We are currently receiving almost 5000 advice letters per year, a volume that represents an increase of well over 1000 per year since this proceeding began. With so many advice letters to deal with, under the severe time constraints we discuss later, both our staff and third parties must be able to analyze advice letters rapidly. Rules 2.1 and 2.2 provide important tools to that end.
We have revised the 2001 Draft versions of these rules to remove references to other rules not adopted at this time. We have also made several of the content requirements more specific, again with the intent of enabling the utility to easily assemble all the information it needs to submit, and enabling reviewers to easily determine whether all needed information was submitted. Through these means, the routine advice letters (the vast majority) can be processed with a minimum of fuss, and the few problematic advice letters can be readily identified.
3.3 Rules 3-3.4 (Advice Letter Service Lists, Service by Internet, Filing and Serving Advice Letters and Related Documents)5
These rules enable utilities to distribute their advice letters effectively and efficiently. They also enable persons interested in particular utilities or particular subjects to obtain relevant advice letters easily. The rules provide for maximum reliance on service by Internet: Persons desiring such service need only provide the utility with their e-mail address when they ask to be included on an advice letter service list. A person receiving an advice letter by e-mail commits in turn to serve that person's protest or response to the advice letter by e-mail on the utility filing the advice letter.
As compared to the 2001 Draft, the rules adopted today rely to a far greater extent on the Internet for service of advice letters and related documents. Thus, persons on the utilities' advice letter service lists will be able to receive an advice letter on the same day that it is filed with the reviewing Industry Division. Of course, those persons who for any reason do not want to receive advice letters electronically may choose to receive them by regular mail.
Another significant change concerns the date of filing, from which various other important dates, such as the deadline for protests, is determined. Under the 2001 Draft, the date of filing was defined as the date when report of the advice letter appeared in the Commission's Daily Calendar. While generally that report would appear within one or two business days of the reviewing Industry Division's receipt of the advice letter, delays of a week or more sometimes occur. Such indeterminacy creates problems both for utilities (who must take steps to implement any actions proposed in an advice letter), customers (who might be planning service changes on the basis of an advice letter), and anyone who might want to protest or otherwise respond to an advice letter. Under the rules adopted today, an advice letter is filed on the date that the reviewing Industry Division receives the advice letter. The new definition eliminates the indeterminacy in relying on the Daily Calendar. Moreover, since a utility must serve its advice letter on or before the date that it files the advice letter with the reviewing Industry Division, and since our rules entitle "any person" to request inclusion on a utility's service list, we think the Daily Calendar should not be treated as the primary means for obtaining notice of an advice letter. Nevertheless, the Daily Calendar will continue to note the "filed" date of all advice letters received by the Industry Divisions.
These rules do not provide at this time for Internet filing of advice letters with the reviewing Industry Division.6 Because of the critical importance of maintaining the accuracy and completeness of Commission records, and the sheer volume of advice letters received by the Industry Divisions, the implementation of Internet filing is more complex than accepting service by Internet. Consequently, we have authorized the Industry Divisions to explore implementation issues with the utilities in the respective industries. (See Resolution M-4809 (June 19, 2003).) Under this resolution, the Telecommunications Division has conducted a pilot program and is currently using CD-ROMs for advice letter filing and storage; the Telecommunications Division also accepts protests sent either by letter or e-mail. (See Resolution T-16807 (December 5, 2003).) We expect and encourage all the Industry Divisions to conduct workshops, pilot programs, and other cooperative efforts to enable a smooth and orderly transition from the current paper filing system to increased reliance on the Internet and electronic storage media. Consistent with this general approach and with Resolution M-4809, Rule 3.3 authorizes the Executive Director to develop procedures for electronic filing.
3.4 Rules 4-4.8 (Advice Letter Review and Disposition)7
These rules enable most advice letters to be deemed approved and to go into effect within 30 days of filing. They also authorize the reviewing Industry Division to approve or reject any advice letter for which the approval or rejection ("disposition") would be a "ministerial" act, as that term is used and discussed in D.02-02-049. Because advice letters, by design, generally concern matters that are not expected to raise factual or policy issues, we expect the large majority of advice letters will be subject to Industry Division disposition.8
Some advice letters are problematic. For example, material factual issues may surface as the result of protests or staff review. Alternatively or additionally, protests or staff review may disclose an underlying disagreement regarding the proper interpretation of a statute or Commission order relevant to the advice letter. In these instances, a Commission order will sometimes be necessary to resolve the merits of the controversy. Advice letters, being informal, are generally ill-suited to resolving material factual issues; further, the interpretation of a statute or Commission order may require consideration by the Commission itself.9 Consequently, these rules must address in detail the situation where problems arise that cannot be readily resolved, even though that situation occurs only in the small minority of advice letters.
Problematic advice letters follow two basic procedural paths. First are those advice letters that are resolved without reaching the merits. For example, where the reviewing Industry Division finds that an advice letter raises material factual issues requiring evidentiary hearing, the Industry Division will reject the advice letter without prejudice. Similarly, if the reviewing Industry Division believes the action proposed in the advice letter is one that the Commission must consider in a formal proceeding, the Industry Division will reject the advice letter without prejudice.10 In both these circumstances, the utility itself may choose to withdraw the problematic advice letter. Whether the advice letter is rejected without prejudice or withdrawn, the utility has the option of filing an application or filing a new advice letter with modifications intended to remove the objections to the prior advice letter.
Second are those advice letters whose merits are addressed by the Commission. When the Commission considers the disposition of an advice letter, it does so by resolution. For these advice letters, the reviewing Industry Division prepares a proposed resolution and circulates it for public review and comment, as provided by Pub. Util. Code § 311(g)(1) and Rule 77.7 of our Rules of Practice and Procedure.
Dealing with a problematic advice letter under either procedural path will generally require more than the 30 days provided in the initial review period. During that time, the reviewing Industry Division must analyze the advice letter and any protests (which are not due until the 20th day of the initial review period). In such a compressed timeframe, the reviewer is hard-pressed simply to determine that there are significant problems with an advice letter, much less for the reviewer to prepare and issue a written disposition and for the utility and protestants to review and comment on that disposition.11 However, the reviewing Industry Division must take some action in the initial review period because otherwise, under Pub. Util. Code § 455, the utility may put many advice letters into effect 30 days after filing.
When this situation arose in the past, it was dealt with mostly by informal agreement between the utility and the reviewing Commission staff that the utility would not put the advice letter into effect while the advice letter was under active review. Rarely, the Commission would order a formal "investigation and suspension" of the advice letter, pursuant to § 455.
This historic practice originated when the annual volume of advice letters numbered in the hundreds rather than the thousands. The new rules update and augment historic practice to better deal with current conditions. There are two fundamental improvements, both of which are keyed to the 30-day initial review period: "deemed" approval of advice letters that are not problematic; and staff authority to suspend the effectiveness of advice letters that are problematic. These procedures will have wide applicability even after exempting advice letters that may become effective in less than 30 days.12
In brief, we have delegated to the reviewing Industry Division the authority, pursuant to § 455, to suspend the effectiveness of an advice letter for up to 120 days past the 30-day initial review period, in order for the division to complete its review and prepare and issue an appropriate disposition. On the other hand, any advice letter that is either subject to § 455 or implements a previously approved rate increase, and that is not suspended, will be deemed approved at the end of the initial review period.
These two innovations will improve the effectiveness of advice letter review while increasing the efficiency of that review. Utilities will have the assurance of regulatory approval, within the 30 days contemplated by Pub. Util. Code § 455, for those advice letters (much the majority, we believe) that are subject to that section and that raise no significant issues. The problematic advice letters will be designated quickly and reasons for the suspension set forth in the suspension letter. We intend by these means to minimize uncertainty, avoid misunderstanding, and ensure timely disposition of even problematic advice letters.13
The rule that we adopt to implement "deemed" approval of advice letters is substantively unchanged from the 2001 Draft. Regarding suspensions by our staff, we already have considerable experience as we authorized this procedure on an interim basis by Resolution M-4801 (April 19, 2001), modified and affirmed as modified by D.02-02-049. We made the interim procedure subject to further modification by order in this proceeding, and we do so today.
Specifically, we limit the delegated suspension authority to a single suspension, namely, the period of up to 120 days expressly provided by Pub. Util. Code § 455. That statute also provides for "a further period [of suspension] not exceeding six months," but we reserve to the Commission itself the power to impose this "further period."14 We make this change because we think that, generally speaking, five months (the initial review period plus a suspension of up to 120 days) is a reasonable amount of time for the reviewing Industry Division to prepare a proposed disposition.
One disposition option open to the Industry Division is to propose a further period of suspension if there is good reason to believe that further consideration of the advice letter will lead expeditiously to a clear approval or rejection on the merits. However, we think the more likely conclusion, where material issues raised by an advice letter remain in doubt after five months, is that the action proposed by the advice letter requires review in a formal proceeding, possibly with an evidentiary hearing. In that situation, a rejection without prejudice is preferable to continued suspension.
We have also refined the rules in the 2001 Draft by directing the reviewing Industry Division to publish an advice letter suspension status report at the Commission's Internet site. The report will reflect new suspensions, changes in status of currently suspended advice letters, and other pertinent information.
3.5 Rules 5-6 (Review, Rehearing, Modification, Extension of Time to Comply With Advice Letter Disposition)15
These rules concern events following Industry Division or Commission disposition of an advice letter. As with a decision on a formal matter, the disposition of an advice letter may be appealed. The appeal of an Industry Division disposition is by request for review by the Commission. Where the original disposition of an advice letter was by Commission resolution, the appeal is by application for rehearing.
Generally, the person requesting review of an Industry Division disposition would be the utility or a protestant; third parties who had notice and an opportunity to participate in review of the advice letter normally should not be allowed to voice objections that they could have made earlier. There are exceptions, however, where third parties either lacked notice or had no reason to participate earlier (for example, if they supported the advice letter as written but the advice letter was rejected or approved conditionally). The rules allow third party requests for review where the third party is able to show an interest in the advice letter and to explain why the third party should be entitled to appeal. Third party challenges will be summarily rejected if entitlement to appeal is not demonstrated.
The rules also contain procedures for petitioning to modify a resolution on an advice letter or for requesting an extension of time to comply with such a resolution. The procedures generally mirror those for modifying or requesting an extension in regard to a decision in a formal proceeding.
3 Rules 1-1.2 are drawn without substantive change from General Rules 1.1, 1.5, 2, and various definitions under General Rule 3 in the 2001 Draft. 4 Rules 2-2.2 are drawn with minor revisions (discussed in the text) from General Rules 5.5 and 5.6 in the 2001 Draft. 5 Rules 3-3.4 are drawn from General Rules 3.2, 4.3, 4.4, 5.4, 7.1, and 7.2 of the 2001 Draft. Most provisions are substantively unchanged; the major revisions are discussed in the text. 6 Both the number and bulk of advice letter-related documents (protests, etc.) are much less, as compared to advice letters themselves; consequently, the Industry Divisions will accept these related documents by electronic filing. 7 Rules 4-4.8 are drawn from General Rules 3.2, 3.5, 3.11, 3.12, 3.13, 4.3, 4.4, 7.4, 7.4.1, 7.4.2, 7.4.3, 7.5, 7.5.1, 7.5.2, 7.6, 7.6.1, and 7.6.2 of the 2001 Draft. Many provisions are substantively unchanged; the major revisions are discussed in the text. 8 There is also a substantial group of advice letters, especially in the telecommunications industry, for which an effective date less than 30 days from filing is authorized by statute or Commission order. The review, disposition, and effectiveness of this group of advice letters are not changed by today's decision. 9 The existence of controversy does not preclude Industry Division disposition. Informal means are sometimes successful in clearing up factual issues, and the reviewing Industry Division may always reject factual or legal arguments that are clearly erroneous. The Industry Division may also resolve questions of interpretation to the extent that the Commission's rules or directions, applicable to the utility, give adequate guidance. 10 For example, historically, most requests for approval of a rate increase had to be presented by formal application and a proper showing at an evidentiary hearing. There are currently exceptions to this rule, notably for many telecommunications carriers and smaller water and sewer system utilities, but the energy utilities, large water utilities, and some local exchange carriers are still generally required to file a formal application. 11 Advice letters also arrive in droves: 2-3 dozen per month received by the Energy and Water Divisions, 2-3 hundred per month received by the Telecommunications Division. 12 See note 8 above. The rules also do not change procedures previously adopted for specific kinds of advice letters, even where those procedures are inconsistent with the procedures contained in these rules. On the other hand, rules previously adopted to govern advice letters generally, such as GO 96-A, are superseded by the rules adopted today to the extent they are inconsistent. 13 The divisions that review advice letters currently have an internal goal of 90 days from filing within which to process and close them. Given the sheer volume of advice letters, the divisions have done very well in terms of meeting their goal. For example, out of a total of 3,847 advice letters filed in calendar year 2003 to the Telecommunications Division, 75 (or less than one out of 50) were open and pending for more than 90 days as of January 5, 2004. We plan to further improve the timeliness of advice letter disposition, and today's decision will provide the reviewing Industry Divisions with important tools to that end. 14 In other words, § 455 authorizes suspensions of 120 and 180 days, to run consecutively from the expiration of what we call the initial review period, i.e., the first 30 days following the filing of an advice letter. Thus, under the statute, the Commission has up to 330 days to process an advice letter. Under the rules we adopt today, however, we intend to have an actual or pending disposition of virtually every advice letter within 150 days of filing. While we retain the authority under § 455 to order a "further period" of suspension, we intend to exercise that authority only when it appears the additional suspension will be the most expeditious way to resolve the advice letter on the merits. However, if our deliberation on a resolution presented by the Industry Division extends beyond 150 days after filing of the advice letter, the suspension is automatically extended for a further period (not to exceed 180 days) until we act on the resolution. 15 Rules 5-6 are drawn with minor revisions (discussed in the text) from General Rules 7.7-7.8 in the 2001 Draft.
